============================================================================
                                United States
                      SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C.   20549


                                  FORM 10-Q

 (Mark One)
   [ X ]  QUARTERLY REPORT FOR THE PERIOD ENDED  MARCH 31,  2001  PURSUANT TO
          SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

   [   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                        Commission file number 0-31781

                         MediChem Life Sciences, Inc.
            (Exact name of registrant as specified in its charter)

           Delaware                                       36-3518660
  -------------------------------                      ----------------
  (State or other jurisdiction of                      (I.R.S. Employer
  incorporation or organization)                      Identification No.)

   2501 Davey Rd., Woodridge, Illinois                       60517
 ----------------------------------------                 ----------
 (Address of principal executive offices)                 (Zip Code)

                                (630) 783-4600
                                --------------
             (Registrant's telephone number, including area code)

    Indicate by check mark whether  the registrant (1) has filed all  reports
 required to be filed by Section 13  or 15(d) of the Securities Exchange  Act
 of 1934 during the preceding 12 months (or for such shorter period  that the
 registrant was required to file such  reports), and (2)  has been subject to
 such filing requirements for the past 90 days.   Yes  X   No __


 As of May 2, 2001, 26,511,015 shares of the Common Stock, $.01 par value, of
 the registrant were outstanding.

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                      Website is:  http://www.medichem.com

<PAGE>

                MEDICHEM LIFE SCIENCES, INC. AND SUBSIDIARIES
                                  FORM 10-Q
                                    INDEX
                       For Quarter Ended March 31, 2001

                                                                       Page
    Part I.    Financial Information                                   ----

      Item 1.  Financial Statements
               Condensed Consolidated Balance Sheets                     2
               Condensed Consolidated Statements of Operations           3
               Condensed Consolidated Statements of Cash Flows           4
               Notes to Condensed Consolidated Financial Statements      5

      Item 2.  Management's Discussion and Analysis of Financial
               Condition and Results of Operations                       8

      Item 3.  Quantitative and Qualitative Disclosures About
               Market Risk                                              11

    Part II.   Other Information

      Item 6.  Exhibits and Reports Filed on Form 8-K                   11

    Signatures                                                          12

<PAGE>


 PART I. FINANCIAL INFORMATION

 ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
                MediChem Life Sciences, Inc. and Subsidiaries
                    Condensed Consolidated Balance Sheets

                                                            March 31,          December 31,
                                                              2001                 2000
                Assets                                    (Unaudited)
                                                          ------------         ------------
 <S>                                                     <C>                  <C>
 Current assets:
  Cash and cash equivalents                              $   7,056,356        $  12,812,294
  Accounts receivable, net                                   2,812,545            2,437,234
  Accounts receivable - related party                        2,323,444              729,465
  Investments, available-for-sale securities                 6,454,335            8,464,948
  Prepaid assets                                               671,350              623,424
  Deferred taxes                                               100,678              100,678
  Other current assets                                       1,425,440            1,349,968
                                                          ------------         ------------
        Total current assets                                20,844,148           26,518,011

 Property and equipment, net                                27,263,059           25,632,716
 Intangibles, net                                           29,305,219           30,148,437
 Goodwill, net                                              22,413,246           22,808,774
 Deferred taxes                                                788,353                    -
 Other assets                                                  211,396              196,122
                                                          ------------         ------------
        Total assets                                     $ 100,825,421        $ 105,304,060
                                                          ============         ============
        Liabilities and Stockholders' Equity
 Current liabilities:
  Current portion of debt and capital lease obligations  $     600,254        $     247,704
  Accounts payable                                           1,614,959            2,254,930
  Accrued expenses                                           1,328,565            3,835,619
  Deferred revenue                                           1,507,185            1,883,349
                                                          ------------         ------------
        Total current liabilities                            5,050,963            8,221,602

 Long-term debt                                             11,819,803           10,702,411
 Capital lease obligations, less current portion               145,434              148,840
 Deferred taxes                                             11,303,300           11,636,370
                                                          ------------         ------------
        Total liabilities                                   28,319,500           30,709,223

 Stockholders' equity:
  Preferred stock, $.01 par value; 10,000,000 shares
    authorized, none issued and outstanding
    at March 31, 2001 and December 31, 2000                          -                    -
  Common stock, $.01 par value, 100,000,000 shares
    authorized, 26,511,028 shares issued and outstanding
    at March 31, 2001; 26,510,042 shares issued and
    outstanding at December 31, 2000                           265,110              265,100
  Additional paid-in capital                                89,764,941           89,711,354
  Deferred compensation                                       (180,263)            (142,909)
  Accumulated deficit                                      (17,351,045)         (15,237,893)
  Accumulated other comprehensive income (loss)                  7,178                 (815)
                                                          ------------         ------------
        Total stockholders' equity                          72,505,921           74,594,837
                                                          ------------         ------------
        Total liabilities and stockholders' equity       $ 100,825,421        $ 105,304,060
                                                          ============         ============

The accompanying notes are an integral part of these condensed consolidated financial statements.

</TABLE>
<PAGE>
<TABLE>
                 MediChem Life Sciences, Inc. and Subsidiaries
                Condensed Consolidated Statements of Operations
                                 (Unaudited)
                                                                   Three-month period
                                                                     ended March 31,
                                                              ----------------------------
                                                                  2001             2000
                                                              -----------      -----------
 <S>                                                         <C>              <C>
 Contract Revenue:
  Contract revenue                                           $  3,702,735     $  3,434,073
  Contract revenue-related party                                2,252,416          707,709
                                                              -----------      -----------
 Total contract revenue                                         5,955,151        4,141,782

 Contract service costs:
  Contract service costs                                        2,578,162        1,847,474
  Contract service costs-related party                            635,907          303,800
                                                              -----------      -----------
 Total contract service costs                                   3,214,069        2,151,274

 Gross profit                                                   2,741,082        1,990,508

  Milestone and intellectual property revenue, net                189,179                -
  Milestone and intellectual property
    revenue-related party, net                                          -          350,000
                                                              -----------      -----------
 Total milestone and intellectual property revenue, net           189,179          350,000

 Operating expenses:
  Selling, general and administrative                           4,565,375        1,842,735
  Depreciation and amortization                                 1,841,331          260,228
                                                              -----------      -----------
 Total operating expenses                                       6,406,706        2,102,963

 Income (loss) from operations                                 (3,476,445)         237,545

 Other income (expense):
  Interest expense                                                (19,753)        (180,409)
  Interest income                                                 261,623           39,324
  Change in value of redeemable stock warrants                          -       (1,905,487)
                                                              -----------      -----------
 Total other income (expense)                                     241,870       (2,046,572)
                                                              -----------      -----------

 Loss before income taxes                                      (3,234,575)      (1,809,027)
 Provision (benefit) for income taxes                          (1,121,423)          38,102
                                                              -----------      -----------
 Net loss                                                      (2,113,152)      (1,847,129)
   Less:
      Accretion to redemption value of preferred stock                  -          323,220
                                                              -----------      -----------
      Net loss available to common stockholders              $ (2,113,152)    $ (2,170,349)
                                                              ===========      ===========
 Per share data - basic and diluted:
      Net loss available to common stockholders              $      (0.08)    $      (0.29)
                                                              ===========      ===========
      Pro forma net loss available to common stockholders                     $      (0.16)
                                                                               ===========
      Weighted average number of common shares outstanding     26,510,414        7,462,228
                                                              ===========      ===========
      Pro forma weighted average number of common shares
        outstanding                                                             13,813,349
                                                                               ===========

The accompanying notes are an integral part of these condensed consolidated financial statements.

</TABLE>
<PAGE>
<TABLE>

                 MediChem Life Sciences, Inc. and Subsidiaries
                Condensed Consolidated Statements of Cash Flows
                                 (Unaudited)

                                                                  Three-month period
                                                                    ended March 31,
                                                             ----------------------------
                                                                 2001             2000
                                                             -----------      -----------

 <S>                                                        <C>              <C>
 Cash flows from operating activities:
   Net loss                                                 $ (2,113,152)    $ (1,847,129)
   Adjustments to reconcile net loss to net
     cash used in operating activities:
       Depreciation and amortization                           1,846,408          260,228
       Bad debt expense                                            4,373          (10,615)
       Deferred taxes                                         (1,121,423)               -
       Redeemable stock warrant appreciation                           -        1,905,487
       Noncash compensation expense                               15,839                -
       Noncash interest expense                                        -           19,756
       Changes in assets and liabilities:
         Accounts receivable                                  (1,973,663)        (492,452)
         Prepaid and other current assets                       (123,398)         (28,154)
         Other assets                                            (24,724)        (102,656)
         Accounts payable                                       (639,971)        (105,997)
         Accrued expenses                                     (2,507,054)        (296,310)
         Other liabilities                                      (376,164)        (446,222)
                                                             -----------      -----------
 Net cash used in operating activities                        (7,012,929)      (1,144,064)
                                                             -----------      -----------
 Cash flows from investing activities:
   Capital expenditures                                       (2,175,817)      (2,295,869)
   Proceeds from the sale of securities                        2,018,606                -
                                                             -----------      -----------
 Net cash used in investing activities                          (157,211)      (2,295,869)
                                                             -----------      -----------
 Cash flows from financing activities:
   Net borrowings under revolving line of credit                       -        1,000,000
   Proceeds from the issuance of loans payable                 1,481,246                -
   Repayment of loans payable                                    (11,074)         (10,478)
   Repayment of capital lease obligations                        (56,374)         (50,912)
   Repayment of debt to stockholder                                    -       (3,000,000)
   Proceeds from options exercised                                   404                -
                                                             -----------      -----------
 Net  cash provided by (used in) financing activities          1,414,202       (2,061,390)
                                                             -----------      -----------
 Net decrease in cash and cash equivalents                    (5,755,938)      (5,501,323)

 Cash and cash equivalents at beginning of period             12,812,294        8,164,730
                                                             -----------      -----------
 Cash and cash equivalents at end of period                 $  7,056,356     $  2,663,407
                                                             ===========      ===========
 Supplemental disclosure of cash flow information:
   Interest paid                                            $    241,690     $    206,600
   Income taxes paid                                        $          -     $          -

 Supplemental disclosure of noncash investing activities:
   Equipment acquired under capital lease                   $     52,738     $          -


The accompanying notes are an integral part of these condensed consolidated financial statements.

</TABLE>
<PAGE>

               MEDICHEM LIFE SCIENCES, INC. AND SUBSIDIARIES
           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)

 (1)  Basis of Presentation

 The accompanying  condensed  consolidated  financial  statements  have  been
 prepared in accordance with accounting principles generally accepted in  the
 United States of America and  applicable Securities and Exchange  Commission
 regulations for interim financial statements.  These financial statements do
 not include  all  of  the  information  and  notes  required  by  accounting
 principles generally accepted in the United  States of America for  complete
 financial   statements.   In  the  opinion  of  management,  the   financial
 statements presented contain all adjustments, consisting of normal recurring
 adjustments, which are necessary  for a fair  presentation of the  financial
 position and results of operations for  the periods presented.  The  results
 of operations  for the  three-month  period ended  March  31, 2001  are  not
 necessarily indicative of the  operating results  for the  full year.  These
 financial  statements  should  be  read  in  conjunction  with  our  audited
 financial statements  and  the  notes  thereto  included  in  our  Company's
 Annual Report on Form 10-K for the fiscal year ended December 31, 2000.

 (2)  Reclassifications

 Certain  amounts  in  previously  issued  financial  statements  have   been
 reclassified to conform to the current year's presentation.

 (3) Business Combinations

 On May 31, 2000, we acquired all the outstanding common stock of  ThermoGen,
 Inc. and Emerald  BioStructures, Inc.  The acquisitions  were accounted  for
 using the purchase method of accounting.

 The following unaudited pro forma financial information for the three months
 ended March 31, 2000 presents combined results of operations of the  Company
 as if ThermoGen and  Emerald BioStructures had been  acquired on January  1,
 2000.  The pro forma financial information does not necessarily reflect  the
 results of operations  that would have  occurred had  the acquisitions  been
 consummated at the beginning of the period presented.

     Total contract revenue                        $    4,846,915
     Net loss available to common stockholders     $   (3,514,618)
     Per share net loss available to common
       stockholders - basic and diluted            $        (0.28)


 (4) Related Party Transactions

 On February 22, 2001, the Company entered into a contract with Advanced Life
 Sciences, Inc. to produce and deliver  a certain compound for $1.1  million.
 Advanced Life Sciences,  Inc. is an  early  stage  drug  development company
 owned by MediChem's Chairman, CEO and principal stockholder.  The price  for
 producing the  compound approximates  the fee  that would  be charged  by  a
 third-party chemistry service  provider, and the  compound was delivered  in
 March 2001.  The payment terms are ninety days from the delivery date.

 (5) Debt

 The Company  has a  $12,000,000 construction  loan related  to its  recently
 completed Woodridge, Illinois facility.   The loan  has a limited  unsecured
 principal guaranty from  the Company's  Chairman and  CEO in  the amount  of
 $3,000,000.  Interest is payable monthly  at the floating prime rate,  which
 was 8.0% at March 31, 2001.   Following payment of all invoices relating  to
 the facility and obtaining the certificate  of occupancy, the Company  plans
 to convert this loan  into a 5-year mortgage  loan amortized over 20  years,
 with interest at an index interest rate plus 225 basis points, pursuant to a
 binding credit arrangement  provided by the  same financial institution.  At
 March 31, 2001,  $11,815,371 was  outstanding under  the construction  loan.
 This borrowing has been classified as a non-current liability as the Company
 has the intent and ability to refinance this amount on a long-term basis.

 On January 29, 2001, the Company  entered into a $352,000 three-month  note.
 This note is due on April 29, 2001 and bears interest at the floating 30 day
 LIBOR rate.

 (6) Net Loss Per Share

<TABLE>
 The following table summarizes the calculations for net loss per share:

                                        For the three-month period ended
                                                March 31, 2001
                                   ------------------------------------------
                                                    Average
                                   Income (loss)     shares         Per share
                                    (numerator)   (denominator)       amount
                                    -----------    -----------        ------
 <S>                               <C>            <C>                <C>
 Net loss                          $ (2,113,152)

 Common stock outstanding                           26,510,414
                                                   -----------
 Basic and diluted loss per share:
   Net loss available
     to common stockholders        $ (2,113,152)    26,510,414       $ (0.08)
                                    ===========    ===========        ======


                                        For the three-month period ended
                                                March 31, 2000
                                   ------------------------------------------
                                                    Average
                                   Income (loss)     shares         Per share
                                    (numerator)   (denominator)       amount
                                    -----------    -----------        ------
 <S>                               <C>            <C>                <C>
 Net loss                          $ (1,847,129)
   Less accretion to redemption
     value of preferred stock           323,220
                                    -----------
 Class A common stock outstanding                    7,462,228
                                                    ----------
Basic and diluted loss per share:
  Net loss available
    to common stockholders         $ (2,170,349)     7,462,228       $ (0.29)
                                    ===========    ===========        ======

</TABLE>

 Basic and diluted  net earnings  (loss) per  common share  are presented  in
 conformity with  SFAS No.  128, Earnings  per  Share, and  SAB 98,  for  all
 periods  presented.   Under the  provisions  of  SAB 98,  common  stock  and
 redeemable convertible preferred stock that has  been issued  or granted for
 nominal consideration prior to the anticipated effective date of the initial
 public offering must be included in the calculation of basic and diluted net
 earnings (loss) per common share as if these shares had been outstanding for
 all periods presented.

 In accordance with SFAS No. 128,  basic and diluted net earnings (loss)  per
 share have  been computed  using the  weighted-average number  of shares  of
 common stock outstanding during the period.  Pro forma basic and diluted net
 earnings (loss) per common share, as presented in the condensed consolidated
 statements of operations, has been computed for the three-month period ended
 March 31, 2000 as described above,  and also gives effect to the  conversion
 of the Company's Class  A preferred stock  which automatically converted  to
 common stock immediately prior  to the completion  of the  Company's initial
 public offering on  October 26, 2000  (using the "as  if converted"  method)
 from the original date of issuance.

 (7) Comprehensive Income (Loss)

<TABLE>
 The following table presents the  components of the Company's  comprehensive
 income (loss) for the three-months ended March 31, 2001:

     <S>                                                     <C>
     Net (loss)                                              $ (2,113,152)

     Other comprehensive income
        Unrealized gain on available-for-sale securities            7,993
                                                              -----------
     Total comprehensive (loss)                              $ (2,105,159)
                                                              ===========
</TABLE>

 (8) Subsequent Events

 On  April 25,  2001,  the  Company modified the terms  of an operating lease
 for  certain  furniture  and  fixtures.  This  modification  resulted in the
 reclassification of the lease to a capital lease.  The present value of  the
 minimum lease payments is $ 1.1 million  under the new lease terms,  and the
 interest rate implicit in the lease is 8%.  As a result a capital asset  and
 long-term obligation will be established for $1.1 million.  The term of this
 lease is 60 months from the date of modification.


            ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

 OVERVIEW

 Founded in 1987, we believe we were the first independent chemistry  company
 to  offer  a  broad array  of discovery-related medicinal chemistry services
 to pharmaceutical  and  biotechnology  customers.  From  a  company  focused
 exclusively on medicinal chemistry  services, we have  evolved into a  full-
 service drug discovery technology and  services company. Our development  of
 strong relationships with  pharmaceutical companies  by initially  providing
 basic medicinal chemistry services helped us  to identify their unmet  needs
 in the later stages of the drug discovery process. In response, we  expanded
 our  service  offerings  to  include  process  development,  analytical  and
 separations chemistry and chemical synthesis and scale up.  To capitalize on
 recent  advances  in  genomics,  we  have  acquired and developed technology
 and  services  in  early-stage   proteomics,   combinatorial  chemistry  and
 biocatalysis.

 RECENT ACQUISITIONS

 On May 31, 2000, we acquired all the outstanding common stock of  ThermoGen,
 Inc. and Emerald  BioStructures, Inc.  The acquisitions  were accounted  for
 using the  purchase  method of  accounting  and our  results  of  operations
 included the results of ThermoGen and  Emerald BioStructures since the  date
 of acquisition.  We issued approximately  5.0 million shares of our Class  A
 common stock in exchange for the outstanding shares of ThermoGen and Emerald
 BioStructures.  The  purchases resulted  in approximately  $55.7 million  of
 goodwill and intangibles.

 INITIAL PUBLIC OFFERING

 On October 31, 2000, we completed  our initial public offering of  7,360,000
 shares of common stock (which included  960,000 over-allotment shares) at  a
 public offering price of $7.00 per share.  We received net proceeds of $45.3
 million.  We  used $9.7 million  of the net  proceeds to repay  in full  and
 terminate our credit facility, $11.5 million for the mandatory redemption of
 outstanding preferred stock,  $2.1 million  for the  optional redemption  of
 outstanding warrants,  $1.6 million  for  general corporate  purposes,  $1.5
 million to repay a note payable to  a stockholder and $0.4 million to  repay
 outstanding shareholder  loans arising  from the  acquisition of  ThermoGen,
 Inc.


 RESULTS OF OPERATIONS

 Three-month period ended March 31, 2001 compared with the three-month period
 ended March 31, 2000

 Contract revenue
 Total contract revenue including related party increased 44% to $6.0 million
 for the three-month period ended March  31, 2001, from $4.1 million for  the
 three-month period ended March 31, 2000.  Of this increase, $0.7 million was
 due to revenue generated from the May 2000 acquisitions, while the remainder
 of the increase is due to general sales growth.

 Contract revenue excluding related  party increased 8%  to $3.7  million for
 the three-month  period ended  March 31,  2001, from  $3.4 million  for  the
 three-month  period  ended  March  31,  2000.   Increased  contract  revenue
 excluding related  party was  achieved from  higher  volume in  our  service
 offerings for  molecular biology,  biocatalysis  and SBIR  grants.  Contract
 revenue-related party increased  218% to  $2.3 million  for the  three-month
 period  ended March 31, 2001, from $0.7 million  for the three-month  period
 ended March 31, 2000.  The  increase in  contract revenue-related party  was
 achieved from a chemical synthesis and  scale up project with Advanced  Life
 Sciences.

 Gross profit
 Gross profit from total contract revenue  increased 38% to $2.7 million  for
 the  three-month  period ended  March 31, 2001, from  $2.0 million  for  the
 three-month  period ended  March 31, 2000.  Gross  profit excluding  related
 party decreased 29% to $1.1 million  for the three-month period ended  March
 31, 2001, from $1.6 million for the three-month period ended March 31, 2000.
 Related party gross  profit increased 300%  to $1.6 million  for the  three-
 month period ended  March 31, 2001,  from $0.4 million  for the  three-month
 period ended March 31, 2000.

 Gross profit as a percent of total contract revenue decreased to 46% for the
 three-month period ended March 31, 2001, from 48% for the three-month period
 ended March 31, 2000.  Gross profit excluding related party as a percent  of
 contract revenue decreased to 30% for the three-month period ended March 31,
 2001, from 46% for the three-month period ended March 31, 2000.  A softening
 in customer demand for our traditionally strong chemical synthesis and scale
 up services resulted in  lower utilization of scientific  staff.  The  lower
 utilization  is  a  result  of  new  hires  in scientific staff to  meet the
 needs  associated with  planned revenue growth.  Since  the scientific staff
 represents a fixed cost to the  Company, utilization varies with changes  in
 contract service revenue volume.   Related party  gross profit  increased to
 72% of related party contract revenue for the three-month period ended March
 31, 2001,  from 57% for  the three-month period ended  March 31, 2000.  This
 increase is attributed  to a chemical  synthesis and scale  up  project with
 Advanced Life Sciences.

 Milestone and intellectual property revenue
 Milestone and intellectual  property revenue decreased  46% to $189,000  for
 the three-month period ended  March 31, 2001, from  $350,000 for  the three-
 month period ended  March 31,  2000.   The entire  milestone revenue  amount
 represented third  party  activity  and resulted  from  the  achievement  of
 contract milestones with Degussa.

 Operating expenses
 Selling, general and administrative expenses increased 148% to $4.6  million
 for the three-month period ended March  31, 2001, from $1.8 million for  the
 three-month period ended March 31, 2000.  As a percentage of total  contract
 revenues,  selling,  general  and   administrative  expenses  increased   33
 percentage points to 77%  for the three-month period  ended March 31,  2001,
 from 44% for the three-month period ended  March 31, 2000.  The increase  in
 selling, general and administrative expenses was due primarily to additional
 sales offices  and  an  increase  in  marketing  personnel  to  support  our
 expanding customer base, an increase in  facility costs associated with  the
 development of  our  Woodridge  Discovery  Center  and  integration  efforts
 relating to the ThermoGen and Emerald BioStructures acquisitions.

 Depreciation and amortization  expenses increased  to $1.8  million for  the
 three-month period ended March 31, 2001,  from $260,000 for the  three-month
 period ended March 31,  2000.  The increase  was due to higher  depreciation
 expense  associated   with  facilities   expansion  and   $1.2  million   of
 amortization expense  resulting  from  intangible  assets  acquired  in  the
 ThermoGen and Emerald BioStructures acquisitions.

 Other expenses, net
 Interest income increased to $262,000 in the three-month  period ended March
 31, 2001, from $39,000 in the three-month period ended March 31, 2000.  This
 increase is  due  primarily to  interest  earned on  the  available-for-sale
 securities purchased with  proceeds received from  our October 2000  initial
 public offering.

 Interest expense decreased to $20,000 for the three-month period ended March
 31, 2001, from  $180,000 for the  three-month period ended  March 31,  2000.
 The interest expense for the period  ended March 31, 2000 was primarily  the
 result of interest  on the $15  million credit facility  and the $5  million
 term loan.  This debt  was  repaid with a portion of the net  proceeds  from
 the initial  public  offering.  Interest  paid  on  the  Woodridge  facility
 construction loan was capitalized  until  March 2001.  In the second quarter
 of  2001,  we  will  convert  the  loan  into  a  mortgage  loan  and  incur
 approximately $1.1 million per year in interest expense.

 Income taxes
 An income tax  benefit of  $1.1 million  was recognized  in the  three-month
 period ended March 31,  2001 compared to  a tax expense  of $38,000 for  the
 three-month period ended March 31, 2000.  The tax benefit was recognized  as
 a result of a net operating loss and temporary differences arising from  the
 amortization of intangible  assets of approximately  $788,000 and  $333,000,
 respectively.  The  net taxable losses  generated this year  can be used  to
 offset future taxable income for a period of 20 years.  The Company believes
 it is more likely than not that it will be able to utilize the net operating
 loss carry forward when operations become profitable in future years.

 LIQUIDITY AND CAPITAL RESOURCES

 We have historically funded our business through cash flows from operations,
 proceeds from  borrowings and  the issuance  of preferred  stock and  public
 common stock.  During  the three-month period ended  March 31, 2001 and  the
 year ended December 31,  2000, we generated/(used)  ($7.0) million and  $1.0
 million, respectively, in cash flows from operations.

 During the  three-month period  ended  March 31,  2001  and the  year  ended
 December 31, 2000, total  capital expenditures were  $2.2 million and  $20.3
 million, respectively.  Capital expenditures were incurred predominantly  in
 connection with the construction of our Woodridge facilities.

 In April 1999, we began to develop a 14-acre site in Woodridge, Illinois for
 the construction of  a new 100,000  square foot  headquarters and  discovery
 laboratories center.  This facility is  estimated to cost $18.5 million  for
 construction and an additional $5.0 million for laboratory  instrumentation,
 software, furniture and equipment upgrades.  A total of $22.1 million of the
 estimated total costs of  our new facility had  been incurred through  March
 31, 2001.  In  May 2000, we  received an 18-month  construction loan in  the
 amount of $12.0 million  to finance  the project.  Following the  payment of
 all invoices  related  to  the project  and  obtaining  the  certificate  of
 occupancy, we anticipate entering into a  mortgage loan as a more  permanent
 form of financing for our facility.  The new facility came into operation in
 the first  quarter of  2001.   The new  offices and  laboratories have  been
 developed with the  capability of being  expanded by  an additional  100,000
 square feet.

 Working capital  was $15.8  million at  March 31,  2001, compared  to  $18.3
 million at December 31, 2000.  The decrease in working capital at March  31,
 2001, was  primarily due  to a  reduction of  accounts payable  and  accrued
 expenses and an increase in accounts receivable.

 We believe that the net proceeds from our initial public offering,  together
 with cash expected to be generated from operations and borrowings under  the
 mortgage loan, will be  sufficient to fund  our anticipated  working capital
 needs and capital expenditures, other  than financing necessary  to complete
 future acquisitions, if any, for at least the next 12 to 15  months.  Future
 acquisitions, if any, could be funded with the remaining net proceeds of the
 offering and/or the issuance of debt or equity securities.  There can be  no
 assurance that attractive acquisition opportunities will be available to  us
 or will be available at prices and upon such other terms that are attractive
 to us.  We  regularly evaluate potential  acquisitions of other  businesses,
 products and product lines and may hold discussions regarding such potential
 acquisitions.    As  a  general  rule,   we  will  publicly  announce   such
 acquisitions only after a definitive purchase agreement has been signed.  In
 addition, in  order to  meet our  long-term  liquidity needs  or  consummate
 future  acquisitions,  we  may   incur  additional  indebtedness  or   issue
 additional  equity  and  debt  securities,  subject  to   market  and  other
 conditions.  There can be no  assurance that such additional  financing will
 be available on terms acceptable to us or at all.  Our failure to  raise the
 funds necessary to finance our future cash requirements or consummate future
 acquisitions could adversely affect our ability  to pursue our strategy  and
 could negatively affect our operations in future periods.

 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 The discussion of our results of  operations and financial condition  should
 be  read  in  conjunction  with  the  accompanying  consolidated   financial
 statements and the notes thereto included within this report. This Form 10-Q
 contains "forward-looking statements" within the  meaning of Section 27A  of
 the Securities Act of  1933, as amended, and  Section 21E of the  Securities
 Exchange Act  of  1934,  as  amended.    Our  actual  results  could  differ
 materially from  those  contained  in  the  forward-looking  statements  and
 therefore, prospective investors are cautioned that any such forward-looking
 statements are not guarantees  of future performance  and involve risks  and
 uncertainties.  Actual events or results may differ from those discussed  in
 the forward-looking statements  as a result  of various factors,  including,
 without limitation, a reduction in research and development spending in  the
 pharmaceutical and  biotechnology  industries,  our ability  to  compete  in
 multiple areas of the drug development technology and services industry, the
 loss of  a  significant customer,  the  termination of  contracts  on  short
 notice, our ability to attract and  retain scientific personnel, the  impact
 of government regulations on our service  offerings, our ability to  produce
 proprietary technology, to protect our intellectual property and to  license
 technologies from others.  We refer you to the detailed discussion of  these
 and other risk factors contained in our registration statement on Form  S-1,
 as declared effective on October 26, 2000.


 ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 The primary objective of our investment activities is to preserve  principal
 while at the same time maximizing the income we receive from our  activities
 without increasing risk.  Some of the securities that we invest in may  have
 market risk.   This  means that a change  in prevailing  interest rates  may
 cause the fair value of the principal amount of the investment to fluctuate.
 For example, if we  hold a security  that was issued  with a fixed  interest
 rate at the prevailing  rate and the prevailing  rate later rises, the  fair
 value of the principal amount of  our investment will probably  decline.  To
 minimize this risk  in the future,  we intend to  maintain our portfolio  of
 cash equivalents  and short-term  investments in  a variety  of  securities,
 including commercial paper,  government and  non-government debt  securities
 and money market  funds.  The  average duration of  all our investments  has
 generally been less than one  year.  Due to  the short-term nature  of these
 investments, we believe we have no  material exposure to interest rate  risk
 arising from our investments.  Therefore, no quantitative tabular disclosure
 is required.


                    ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

      (a)  Exhibits.
           None

      (b)  Reports on Form 8-K
           None


<PAGE>

                                  SIGNATURES


 Pursuant  to the requirements of Section  13  or  15(d)  of  the  Securities
 Exchange Act  of  1934,  the  Registrant  has duly caused this report to  be
 signed on its behalf by the undersigned, thereunto duly authorized.


                         MEDICHEM LIFE SCIENCES, INC.


                    By:  /s/ R. Richard Wieland
                       ------------------------------
                              R. Richard Wieland
                         Executive Vice President and
                           Chief Financial Officer


                    By:  /s/ Michael J. Cogan
                       ------------------------------
                               Michael J. Cogan
                                Controller and
                           Chief Accounting Officer

 Date:  May 7, 2001